Full Annual Report - Inchcape

Business review
Strategy
Financial review
Delivering solid results above our
expectations despite the unprecedented
global decline in the car industry.
The Group has produced results above
expectations. In addition to the segmental
results, detailed below are the financial
implications of our operational activities.
Central costs
Unallocated central costs for the full year
are £18.8m before exceptional items (2008-
£9.6m). The year on year increase is due to
our extremely low cost base in 2008 as we
did not pay any management bonuses
and benefited from a credit from long-term
share based awards.
Included in central costs is a net gain of
£0.1m from the currency call options taken
out in February 2009 to hedge the currency
impact from a potential strengthening of
Sterling. All options have now been exercised
or lapsed at the end of December 2009.
Joint ventures and associates
The share of profit after tax from joint
ventures decreased by £1.5m to £0.7m in
2009. This is mainly due to the start up costs
of our joint venture in Moscow and lower
profit from our joint venture leasing business
in Belgium.
Exceptional items
The exceptional costs of £18.4m remain the
same as those reported at the half year. We
have taken a prudent view on prospects in
Latvia based on the continued challenging
trading conditions and have taken an
impairment of £10.3m on the carrying value
of the land and buildings. All of the goodwill
relating to Latvia was written off in 2008.
Further restructuring costs of £5.1m were
incurred relating to restructuring in Finland,
the Baltics and Russia and the streamlining
of our European management.
We have also made a provision of £3.0m
related to an onerous lease commitment
on land which was part of the Inchcape
Automotive business which was sold to
Camden Motors. Camden went into
administration during the first half of the
year. The Group remains responsible for the
head lease on this property.
Net financing costs
Net financing costs of £20.8m are £31.2m
lower than last year, as we benefited from
lower interest rates in the majority of our
markets, reduced debt following the use
of the net proceeds from the Rights Issue
and the cash generated from operations
as a result of significantly lower working
capital. The proceeds from the Rights Issue
were used to pay down US$114m higher
rate US$ loan notes at par, resulting in a
one off benefit of £4.0m from the hedging
arrangements in place for the US$ Private
Placement. The balance was used to pay
down revolving debt. Overall, the hedging
arrangements in place for the US$ Private
Placement resulted in a net gain of £0.9m,
including the £4.0m realised benefit
referred to above.
Tax
The effective tax rate before exceptional
items for the year is 28% compared to 26%
in 2008. This increase arises due to the mix
of profits across the territories in which we
operate. The rate is expected to be similar
in 2010 based on our current assumptions
of profit mix.
Minority interests
Profits attributable to minority interests
reduced to £3.0m from £3.9m in 2008. This
was largely a result of lower profits in our
Lithuanian business and the annualised
impact of the acquisition in the first quarter
of 2008 of the remaining 24.9% interest in
our St Petersburg businesses. At the year
end the Group’s minority interests principally
comprise a 33% minority holding in UAB
Vitvela in Lithuania, a 30% share in NBT
Brunei and a 10% share of Subaru Australia.
Foreign currency
During 2009, the Group benefited by £16.7m
from translation of its overseas profits before
tax into Sterling at the 2009 average
exchange rate.
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Inchcape plc ¦ Annual Report and Accounts 2009